Myint v. Allstate Ins. Co.

• Citation: 970 S.W.2d 920
• Parties: Win MYINT and wife Patti K. Myint Plaintiffs/Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant/Appellee.
• Decision Date: 01 June 1998
• Court: Supreme Court of Tennessee

Page 920

970 S.W.2d 920

Win MYINT and wife Patti K. Myint Plaintiffs/Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant/Appellee.

Supreme Court of Tennessee at Nashville.

June 1, 1998.

Joseph H. Johnston, Nashville, for Plaintiffs/Appellants.

Barry Friedman, Paige Waldrop Mills, John D. Schwalb, Nashville, Jon L. Fleischaker, Louisville, KY, for Defendant/Appellee.

OPINION

BIRCH, Justice.

In this cause, the insuror refused to pay a claim under a policy of insurance. The insured contends that such refusal constitutes an "unfair or deceptive act or practice," in violation of the Consumer Protection Act, Tenn.Code Ann. §§ 47-18-101, et seq. ¹ In contrast, the insuror insists that Tenn.Code Ann. § 56-7-105, ² commonly known as the "bad faith statute," is the exclusive remedy for the bad faith denial of an insurance claim. Because Title 56, Chapters 7 and 8 of the Tennessee Code comprehensively regulates the insurance industry, the insuror insists that the acts and practices of an insurance company are never subject to the Consumer Protection Act.

We find, for the reasons stated herein, that the acts and practices of an insurance company may, indeed, be subject to the Consumer Protection Act. We conclude, however, that the facts before us do not evince an act "affecting the conduct of any trade or commerce" such as would be subject to the Consumer Protection Act.

I

The property herein involved is a two-unit structure located at 224 Treutland Street in Nashville. The appellants, Win and Patti Myint, purchased it in 1983 and began leasing the units. Since 1989, they maintained insurance coverage on the structure with the appellee, Allstate Insurance Company, under a "landlord's package" policy. The structure was insured for its estimated market value--$61,000. In April 1991, the ground floor tenant reported water leaking from the second floor. Repairs were made, and the Myints received no further complaints.

In June 1991, Win Myint inspected the property and discovered that water leaking from the second-floor kitchen sink had extensively damaged the ceiling and walls of the ground-level unit. Win Myint then initiated the eviction process against the tenants so that he might make necessary repairs.

When one of those tenants applied for subsidized housing, the Metropolitan Development and Housing Authority investigated her housing status. In processing the application, a building codes officer inspected the property and reported several code violations. On August 5, 1991, the Myints received notice of the codes violations from the chief housing inspector of the Codes Department of the Metropolitan Government of Nashville and Davidson County. The notice described the property as "unfit for human habitation," and a hearing was set for August 20, 1991. The Myints failed to attend the hearing, and the property was classified as "H-6." ³ The Myints were ordered to relocate the structure or demolish it.

On September 27, 1991, the Myints filed a claim with Allstate for the damage caused by the water, and Allstate sent an adjuster to inspect the property. While the claim for water damage was pending, the Myints began to make repairs. On September 30, 1991, Allstate informed them that the claim had been denied because the damage had been caused by slowly leaking water, which is excluded from coverage by the terms of the policy.

On October 1, 1991, the codes officials ordered a halt to the repair process because the Myints had not obtained the appropriate permit. Consequently, the Myints applied for a permit, but this application was denied because the property had been previously scheduled for demolition.

On October 18, 1991, Allstate notified the Myints that the contract of insurance would be terminated as of December 2, 1991. At trial, an Allstate employee testified that the cancellation was due to the overall poor condition of the property, as Allstate's adjuster had observed when he inspected the water damage. On October 23, 1991, a small fire in the basement of the property caused minor smoke damage; it is unclear whether the Myints notified Allstate of this occurrence. Three days later, on October 26, 1991, a second fire engulfed the property and caused substantial damage. The Myints then applied for a variance in order to obtain a building permit. The Metropolitan Board of Housing Code Appeals granted the variance, giving the Myints until September 1, 1992, to bring the property into compliance with code requirements.

On January 10, 1992, the Myints filed with Allstate "sworn statements in proof of loss" for the fire damage. Because Allstate failed to respond as of June 17, 1992, the Myints' attorney wrote Allstate demanding a decision on the claim. On June 23, 1992, Allstate denied the claim, citing two policy violations: (1) the Myints intentionally set fire to the property for the purpose of collecting the insurance proceeds; and (2) the fire damage was the result of an increase in hazard created by the Myints' failure to maintain the property. While the parties stipulated that both fires had been intentionally set, the Myints have always denied any involvement in the setting of the fire.

The Myints subsequently filed suit against Allstate for breach of the insurance policy, violation of the bad faith statute, and violation of the Consumer Protection Act. ⁴ Prior to trial, the trial court dismissed the claim for relief under the Consumer Protection Act. The jury found Allstate liable under the terms of the insurance policy and awarded the Myints $45,000 in damages, subject to a $250 deductible. The jury's award reflected the decrease in the market value of the residence, from approximately $50,000 to $5,000, caused by the fire. The jury further determined that Allstate did not deny the claim in bad faith; thus, the Myints were not entitled to additional damages under the bad faith statute. After the jury verdict, the trial court awarded $13,106 in prejudgment interest to the Myints, pursuant to Tenn.Code Ann. § 47-14-123 (1988).

The Court of Appeals reversed the trial court's prejudgment interest ruling and affirmed the judgment in all other respects. The Court of Appeals reasoned that the Consumer Protection Act is not applicable because the insurer's bad faith statute, Tenn.Code Ann. § 56-7-105, provides the exclusive remedy for the bad faith refusal to pay an insurance claim. The Myints now appeal that determination and also challenge the Court of Appeals' reversal of the trial court's award of prejudgment interest. Pursuant to Tenn. R.App. P. 11, we granted the Myints' application to address both issues. ⁵

II

Allstate and the several insurance companies which filed amicus briefs argue that the Consumer Protection Act does not apply to the insurance industry because the comprehensive insurance regulations in Title 56, Chapters 7 and 8 of the Tennessee Code specifically address unfair or deceptive acts or practices on the part of the insurance industry. Each asserts that Tenn.Code Ann. § 56-7-105, which provides a penalty for an insuror's bad faith refusal to pay a claim, is the exclusive remedy for such refusal. The Myints and the Attorney General, on the other hand, urge that the purposes of the insurance regulations and the Consumer Protection Act are distinct, each with different standards of liability, and each with different remedies. They insist that under appropriate circumstances, both may apply. We note that while this Court has never explicitly held the Tennessee Consumer Protection Act applicable to insurance companies, we implicitly did so in Morris v. Mack's Used Cars, 824 S.W.2d 538, 539-40 (Tenn.1992). In Morris, we cited with approval to Skinner v. Steele, 730 S.W.2d 335 (Tenn.App.1987), a case in which the Court of Appeals expressly held that the insurance industry was not exempt from the Act.

Construction of a statute is a question of law which we review de novo, with no presumption of correctness. Roseman v. Roseman, 890 S.W.2d 27, 29 (Tenn.1994). The role of the Court in construing statutes is to ascertain and give effect to legislative intent. Wilson v. Johnson County, 879 S.W.2d 807, 809 (Tenn.1994). Legislative intent is to be ascertained whenever possible from the natural and ordinary meaning of the language used, without forced or subtle construction that would limit or extend the meaning of the language. Carson Creek Vacation Resorts, Inc. v. Department of Revenue, 865 S.W.2d 1, 2 (Tenn.1993). Here, the language of the statutes at issue provide ample evidence that the legislature did not intend to exclude insurance companies from the purview of the Consumer Protection Act.

First, we examine the insurance regulations which Allstate and several amicae insist are the exclusive means of sanctioning insurance companies for unfair or deceptive acts or practices. The Insurance Trade Practices Act, Tenn.Code Ann. §§ 56-8-101 et seq., was passed in 1981 for the purpose of

regulat[ing] trade practices in the business of insurance ... by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.

Tenn.Code Ann. § 56-8-101 (1994). Section 56-8-104 specifically lists the acts which constitute unfair competition or deceptive acts, including unfair claim settlement practices. Tenn.Code Ann. § 56-8-104(8) (1994). The Insurance Trade Practices Act gives the Commissioner of Commerce and Insurance broad authority to investigate violations of the Act, issue cease and desist orders, impose civil penalties, and order suspension or revocation of insurance licenses. Tenn.Code Ann. §§ 56-8-107 & -109(a) (1994). No private right of action may be maintained under the Act. Tenn.Code Ann. § 56-8-104(8).

While the Insurance Trade Practices Act focuses on the comprehensive regulation of insurance industry practices,...